As the financial markets are getting more competitive, banks and other financial institutions are steadily increasing their interest rates. This makes it more expensive to get a loan today. In response to this, you need to adjust your borrowing behavior. This prevents you from making major financial mistakes. Here are some of the errors that you can make during this competitive, financially risky time.
Avoiding Internet-only banks
Thanks to innovations in computing, there are now banks and other lending institutions that exist purely on the Internet. They have very attractive conditions for opening and maintaining accounts. They deliver deposit growth rates that are six times more than those offered by brick and mortar establishments.
You also do not need to have any minimum balance to maintain your Internet-based bank account. Moreover, these banks do not have any account maintenance fees. Instead of keeping your money in brick and mortar establishments, holding it in an Internet bank account is much better. You will be able to avoid monthly fees and high minimum deposit amounts.
Overlooking the fine print of special financial offers
Sometimes, banks and credit unions provide some special investment offers and instruments. Examples of these are money market offers and Certificates of Deposit (CDs). These special financial offers may be better or similar to those that are offered by Internet-only banks. However, they need to be approached with caution.
Firstly, you should note that these special financial offers are actually temporary. Eventually, the money market rate quoted in the special offer will fall. It will resume the standard, consistent rate which is most likely quite low. The bank or credit union which provides this special offer hopes that you won’t have the speed or astuteness to move your money before the rate drops. If you experience losses on the CDs due to lower rates, the bank experiences profits.
The nature of CD specials
Upon the maturity of a CD special product, it is automatically renewed into a regular CD with a rate that is much lower. Normally, upon this maturity, the bank will give customers a grace period during which they can withdraw their money without experiencing a penalty. This grace period is usually between 5 and 15 days.
If the customer has not moved their funds from the bank account before this period of time expires, they are automatically locked into the regular Certificate of Deposit (CD). Moreover, if a special CD matures into a regular one, the rate usually gets lower. As such, make sure to note the maturity date, grace period and rate of a CD special before investing.
You can earn more money by keeping a keen eye so as to avoid banking mistakes. However, rising interest rates make it so that just a few people earn any interest on their CDs. Despite these stringent conditions, investors who take some time to shop around in search of higher rates of deposit will earn some financial returns. Moreover, the customers who review the offers made by banks will also enjoy some benefits from the higher interest rates!